Many baby boomers aren’t saving enough for retirement, warns Sherry Cooper, chief economist at BMO Nesbitt Burns, in a new resarch note.

The likely consequence will either be longer working lives, or slower economic growth, she says.

Cooper observes, “It is well known that personal savings in the U.S. (and Canada) have fallen to a record low, and have moved into negative territory for the first time in post-war history. In other words, people are spending more than they earn. There has been no net new ‘active’ savings for almost a year even as household net worth is rising as a percent of income.”

While Cooper admits that measures of savings aren’t perfect, she says, “it can safely be said that most baby boomers are woefully unprepared for the financial burdens of retirement, all the more so given the quickening demise of the defined benefit pension plan.”

“Households are vulnerable to far more risk than a few decades ago,” she adds. “No longer can they count on the guarantee of a job, health care and a pension. In addition, in most situations, 401(k) plans are optional, contribution levels are up to the employee, and matching funds by the employer are limited and tied to worker contributions. Most people do not know just how vulnerable they are.”

“Clearly, most baby boomers are inadequately saving for retirement. Most have no idea just how much capital they must accumulate in investable assets,” Cooper warns. “Most rely on an inadequate 401(k) plan and their ability to realize the value in their businesses or their homes. Such reliance is risky given that business liquidation requires a buyer, and, if house prices remain high, chances are the cost of a retirement home will be higher than you realize. If house prices fall, then the equity is lower.”

“Over the next decade, we are likely to see a meaningful rise in active savings if boomers awaken to reality,” Cooper predicts. “This could well mean that trend economic growth could decelerate from a 3.5% pace. Otherwise, boomers will attempt to work longer, and be forced to dramatically reduce spending in their golden years.”